The EU’s misguided call to ban zero rating

The net neutrality debate has come to Europe. Following a go-ahead European Parliament in October 2015, the Body of European Regulators for Electronic Communications (BEREC) is writing the network neutrality rules for the European Union. Net-neutrality advocates, as in they did in United States, are pressuring BEREC to ban so-called internet “fast lanes,” a questionable rule in itself. In a new development, proponents are also demanding a ban on “zero-rating,” a practice by which internet service providers do not count certain services and applications, such as Netflix and Google, against data-usage limits contained in certain pricing plans.

Based in Brussels, BEREC works with the European Commission and national telecom regulators in EU member countries in the creation of EU-wide telecom and internet policy. Although telecom regulatory bodies in the 28 member countries are autonomous, BEREC’s mission is to guide creation, adoption and application of consistent regulation across the EU. Hence, the net-neutrality rules BEREC ultimately adopts will be the likely template for net neutrality throughout the continent.

As such, European policymakers are having the same debate the United States saw in 2014 and 2015 at the Federal Communications Commission. Like it did here, net neutrality has attracted an outpouring of comments from industry and consumer groups on both sides of the issue, with BEREC reporting that it has received almost half a million submissions on the rulemaking. (Comments from R Street’s Mike Godwin can be found here.)

The FCC ultimately adopted a set of network neutrality rules that included the “no fast lane” rule prohibiting ISPs from favoring the delivery of content and applications from one provider over another. An example of this would be if an ISP like AT&T or Comcast demanded a video-on-demand provider such as Netflix to pay more for faster transmission. The bottom line was that network neutrality was supposed to protect applications providers from potential gouging by ISPs.

But it was Facebook, a major application provider, that was first to fall victim to a major nation’s net-neutrality policy. Facebook attempted to strike zero-rating deals with wireless ISPs in India, which would have covered access not only to Facebook, but to weather, health care and news sites. The hope was that zero rating would hasten the spread of internet adoption among India’s poor by dramatically reducing the cost of web usage. Indian regulators instead ruled it a network-neutrality violation and ordered ISPs to stop.

Facebook CEO Mark Zuckerberg, a vocal advocate of net neutrality, said Indian regulators misinterpreted the purpose of the policy. But zero rating also has its critics in the United States, who have asked the FCC take action against T-Mobile’s popular Binge On feature, a zero-rating service open to any content provider as long as they agree to certain technical specifications. Aside from asking ISPs for more information on their zero-rating programs in late 2015, the FCC has thus far made no call on their legality.

Meanwhile in Europe, groups such as the World Wide Web Foundation are calling for BEREC to ban zero rating in the name of keeping the internet open. But their argument that zero rating necessarily hurts smaller content and app providers doesn’t fly. Europe has seen rapid successes include Rovio Entertainment, developer of Angry Birds, and Mojang, developer of Minecraft. Those startups, and other like them, can use zero-rated platforms such as Google’s YouTube, Google Play, Apple’s iTunes and Amazon to reach consumers. Rather than being hurt by zero rating, Europe’s internet entrepreneurs can leverage it. Bans on zero rating address a problem that doesn’t exist and risks doing more harm than good over the long term.

Zero rating can benefit consumers by making the internet cheaper and more accessible, especially in regions where wireless is the dominant broadband infrastructure. It’s the equivalent of a discount or a coupon, marketing staples in any other business. It’s indicative of a healthy market and should be encouraged, not banned.

Originally published at www.rstreet.org on July 28, 2016. Authored by R Street associate fellow Steven Titch.